MANAGEMENT DISCUSSION & ANALYSIS GLOBAL ECONOMY Global growth was 3.4% during calendar year (CY) 2014, similar to CY2013. Growth in the United States improved to 2.4% in CY2014 compared to 2.2% in CY2013.Growth in the Euro Area and Japan, however, continued to remain subdued. There was a slowdown in economic growth in emerging market economies. China's economy grew by 7.4% in CY2014 compared to 7.8% in CY2013. Global growth remains moderate, with uneven prospects across the main countries and regions. It is projected to be 3.4 percent in 2015, in line with forecasts in the January 2015 World Economic Outlook (WEO) Update. Relative to last year, the outlook for advanced economies is improving, while growth in emerging markets and developing economies is projected to be lower, primarily reflecting weaker prospects for some large emerging market economies and oil-exporting countries.(Source: IMF). A Key highlight during the year was the sharp decline in global commodity prices, particularly of crude oil, coal & iron ore. The price of benchmark Brent crude fell from USD 108 / barrel in the beginning of fiscal 2015 to USD 55 / barrel by end-March 2015. INDIAN ECONOMY In fiscal 2015, the Central Statistical Organisation (CSO) introduced a new methodology for calculation of Gross Domestic Product (GDP) and also revised the base year from fiscal 2005 to fiscal 2012. Notable changes in the methodology included replacing GDP at factor cost with GDP at market prices as the official GDP estimate. The sector-wise break-up of GDP is now rebrsented by Gross Value Added (GVA) at market Prices. As per the revised methodology, India's GDP grew by 7.4% during the first nine months of fiscal 2015 compared to growth of 7.0% in the corresponding period of fiscal 2014. In India, the formation of a stable government with a strong electoral mandate in May, 2014 led to an improvement in the Market sentiment. There was recovery in Key economic parameters during the year. Economic growth improved, inflation moderated, the current account deficit and exchange rates remained stable and interest rate came down during the year. The Corporate investment cycle continued to remain subdued; the focus remained on working towards cashflow generation from existing projects and addressing profitability and liquidity challenges in the corporate and SME sectors. The government has taken several steps to improve the operating environment and also announced several reforms. These measures are expected to positively influence economic conditions going forward. Steel industry Scenario (source: Ministry of Steel, Govt. of India) GLOBAL SCENARIO • In 2014, the world crude steel production reached 1661.5 million tonnes (mt) and showed a growth of 1.2% over 2013. (Source: World Steel Association or WSA, prov.) • China remained the world's largest crude steel producer in 2014 (823 mt) followed by Japan (110.7 mt), the USA (88.3 mt) and India (83.2 mt) at the 4th position. • WSA has projected that global apparent steel use will increase by 2% to 1,562 mt in 2014 following growth of 3.8% in 2013 while in 2015, world steel demand will grow by another 2% and will reach 1,594 mt. WSA has projected Indian steel demand to grow by 6.2% in 2015 and by 7.3% in 2016 as compared to global steel use growth of 0.5% and 1.4% respectively. Chinese steel use is projected to decline in both these years by 0.5%. • Per capita finished steel consumption in 2014 is estimated at 217 kg for world and 510 kg for China by WSA. (Note: 2014 data source is provisional and sourced from 'World Steel in Figures 2015', published by WSA in June 2015) DOMESTIC SCENARIO • The Indian steel industry has entered into a new development stage from 2007-08, riding high on the resurgent economy and rising demand for steel. • Rapid rise in production has resulted in India becoming the 4th largest producer of crude steel in 2015 and the country continues to be the largest producer of sponge iron or DRI in the world. • As per the report of the Working Group on Steel for the 12th Five Year Plan, there exist many factors which carry the potential of raising the per capita steel consumption in the country. These include among others, an estimated infrastructure investment of nearly a trillion dollars, a projected growth of manufacturing from current 8% to 11-12%, increase in urban population to 600 million by 2030 from the current level of 400 million, emergence of the rural market for steel currently consuming around 10 kg per annum buoyed by projects like Bharat Nirman, Pradhan Mantri Gram SadakYojana, Rajiv Gandhi Awaas Yojana, smart cities among others. • At the time of its release, the National Steel Policy 2005 had envisaged steel production to reach 110 million tonnes (mt) by 2019-20. However, based on the assessment of the current ongoing projects, both in greenfield and brownfield, the Working Group on Steel for the 12th Five Year Plan has projected that domestic crude steel capacity in the county is likely to be 140 mt by 2016-17 and has the potential to reach 149 mt if all requirements are adequately met. • The National Steel Policy 2005 is currently being reviewed keeping in mind the rapid developments in the domestic steel industry (both on the supply and demand sides) as well as the stable growth of the Indian economy since the release of the Policy in 2005. • I ndia, the world's fourth-largest steel producer, saw its consumption of total finished steel grow by 3.1 per cent to 76.36 million tonnes (MT) in the last fiscal from 74.09 MT in 2013-14. • According to industry body World Steel Association, steel consumption in India is expected to grow by 6.2 per cent to 80 MT in 2015 from 75.3 MT in 2014. In its short range forecast, the association pegs consumption of the metal to grow by 7.3 per cent to 85.8 MT in 2016 as compared to 2015. • For the first month of the current fiscal, consumption of total finished steel grew by 7.1 per cent to 5.503 MT as compared to April 2014, but registered a decline of 23.2 per cent over March 2015 (7.153 MT). PRODUCTION • Steel industry was de-licensed and de-controlled in 1991 & 1992 respectively. • Today, India is the 3 rd largest producer of crude steel in the world. • I n 2014-15, production for sale of total finished steel (alloy + non alloy) was 91.46 mt, a growth of 4.3% over 2013-14. • Production for sale of Pig Iron in 2014-15 was 9.7 mt, a growth of 22% over 2013-14. • I ndia is the largest producer of sponge iron in the world with the coal based route accounting for 90% of total sponge iron production in the country. Data on production for sale of pig iron, sponge iron and total finished steel (alloy + non-alloy) are given below for last six years Indian steel industry : Production for Sale (in million tonnes) Category_2009-10 2010-1 1 201 1-12 2012-13 2013-14 2014-15 Source: Joint Plant Committee; DEMAND - AVAILABILITY PROJECTION • Demand - Availability of iron and steel in the country is projected by Ministry of Steel in its Five Yearly Plan documents. • Gaps in availability are met mostly through imports. • I nterface with consumers by way of a Steel Consumers' Council exists, which is conducted on regular basis. • Interface helps in redressing availability problems, complaints related to quality. STEEL PRICES • Price regulation of iron & steel was abolished on 16.1.1992. Since then steel prices are determined by the interplay of market forces. • Domestic steel prices are influenced by trends in raw material prices, demand - supply conditions in the market, international price trends among others. • An Inter-Ministerial Group (IMG) is functioning in the Ministry of Steel, under the Chairmanship of Secretary (Steel) to monitor and coordinate major steel investments in the country. • The Government earlier took various fiscal and other measures for stabilizing steel prices like significant reduction in import duties on steel, major raw materials, including mineral products and ores and concentrates in last few years. Also, excise duty for steel is currently at 12% and there is no export duty on steel items. The government has also imposed export duty of 30% on all forms of iron ore and 5% on iron ore pellets in order to control ad-hoc exports of the mineral and conserve it for long term requirement of the domestic steel industry. • For ensuring quality of steel several items have been brought under a quality control order issued by the Government. • Further, a Steel Price Monitoring Committee has been constituted by the Government with the aim to monitor price rationalization, analyze price fluctuations and advice all concerned regarding any irrational price behavior of steel commodity. IMPORTS • Iron & steel are freely importable as per the extant policy. • Data on import of total finished steel (alloy + non alloy) is given below for last six years: Indian steel industry : Imports (in million tonnes) EXPORTS • Iron & steel are freely exportable. • Data on export of total finished steel (alloy + non alloy) is given below for last five years and April-Dece (provisional).: OPPORTUNITIES FOR GROWTH OF IRON AND STEEL IN PRIVATE SECTOR The New Industrial Policy Regime The New Industrial policy opened up the Indian iron and steel industry for private investment by (a) removing it from the list of industries reserved for public sector and (b) exempting it from compulsory licensing. Imports of foreign technology as well as foreign direct investment are now freely permitted up to certain limits under an automatic route. Ministry of Steel plays the role of a facilitator, providing broad directions and assistance to new and existing steel plants, in the liberalized scenario. The Growth Profile (i) Steel : The liberalization of industrial policy and other initiatives taken by the Government have given a definite impetus for entry, participation and growth of the private sector in the steel industry. While the existing units are being modernized/expanded, a large number of new steel plants have also come up in different parts of the country based on modern, cost effective, state of-the-art technologies. In the last few years, the rapid and stable growth of the demand side has also prompted domestic entrebrneurs to set up fresh greenfield projects in different states of the country. Crude steel capacity was 101 mt in 2013-14 and India, the 4th largest producer of crude steel in the world, has to its credit, the capability to produce a variety of grades and that too, of international quality standards. The country is expected to become the 2nd largest producer of crude steel in the world soon, provided all requirements for creation of fresh capacity are adequately met. (ii) Pig Iron: India is also an important producer of pig iron. Post-liberalization, with setting up several units in the private sector, not only imports have drastically reduced but also India has turned out to be a net exporter of pig iron. The private sector accounted for 93% of total production for sale of pig iron in the country in 2013-14. The production for sale of pig iron has increased from 1.6 mt in 1991-92 to 7.95 mt in 2013-14. (iii) Sponge Iron: India is the world's largest producer of sponge iron with a host of coal based units, located in the mineral-rich states of the country. Over the years, the coal based route has emerged as a key contributor and accounted for 89% of total sponge iron production in the country. Capacity in sponge iron making too has increased over the years and stood at 45 mt in 2013-14. (Source: Ministry of Steel) I ndia, the world's fourth-largest steel producer, saw its consumption of total finished steel grow by 3.1 per cent to 76.36 million tonnes (MT) in the last fiscal from 74.09 MT in 2013-14. According to industry body World Steel Association, steel consumption in India is expected to grow by 6.2 per cent to 80 MT in 2015 from 75.3 MT in 2014.In its short range forecast, the association pegs consumption of the metal to grow by 7.3 per cent to 85.8 MT in 2016 as compared to 2015. RECENT DEVELOPMENTS Steel consumption although is expected to improve in medium to longer term, however steel is currently reeling under lower demand growth and higher imports (as evident from the data given above) from China, Russia, Koria & Japan and lower exports due to un-competitive prices. Further on account of fall in global commodity prices and higher imports, the domestic steel prices have also fallen, which has resulted into severe brssure on Steel Industry. The banking sector because of high exposure to Iron & steel industry and financial stress of many mid-size Companies in sector is facing problems of NPA. This has impacted their ability to lend amount to the sector, which impacting the liquidity position of many companies in the sector. In view of higher imports and lower demand growth, the sector is facing near term challenges. However the in view of initiatives taken by Government on increase in public investment in infrastructure sector mainly, road and railway, is expected to improve the demand for steel, however, brssure from imports is expected to remain, unless arrested through policy action by the Government. POWER SECTOR SCENARIO Power or electricity is one of the most critical components of infrastructure affecting economic growth and well-being of nations. The existence and development of adequate infrastructure is essential for sustained growth of the Indian economy. The Indian power sector is one of the most diversified in the world. Sources for power generation range from conventional ones such as coal, lignite, natural gas, oil, hydro and nuclear power to other viable non-conventional sources such as wind, solar, and agriculture and domestic waste. The demand for electricity in the country has been growing at a rapid rate and is expected to grow further in the years to come. In order to meet the increasing requirement of electricity, massive addition to the installed generating capacity in the country is required. MARKET SIZE The Indian power sector is undergoing a significant change that is redefining the industry outlook. Sustained economic growth continues to drive power demand in India. The Government of India's focus to attain 'Power For All' has accelerated capacity addition in the country. At the same time, the competitive intensity is increasing on both market side as well as supply side (fuel, logistics, finances and manpower). The Planning Commission's 12th Plan expects total domestic energy production to reach 669.6 million tonnes of oil equivalent (MTOE) by 2016-17 and 844 MTOE by 2021-22. By 2030 - 35, energy demand in India is projected to be the highest among all countries according to the 2014 energy outlook report by British oil giant BP. As of April 2014, total thermal installed capacity stood at 168.4 gigawatt (GW), while hydro and renewable energy installed capacity totalled 40.5 GW and 31.7 GW, respectively. At 4.8 GW, nuclear energy capacity remained broadly constant from that in the brvious year. Indian solar installations are forecasted to be approximately 1,000 megawatt (MW) in 2014, according to Mercom Capital Group, a global clean energy communications and consulting firm. Wind energy market of India is expected to attract about Rs. 20,000 crore (US$ 3.16 billion) of investments next year, as companies across sectors plan to add 3,000 MW of capacity powered by wind energy. INVESTMENT Around 293 global and domestic companies have committed to generate 266 gigawatts (GW) of solar, wind, mini-hydel and bio-mass based power in India over the next 5-10 years. The initiative would entail an investment of about US$ 310-350 billion. The industry has attracted FDI worth US$ 9,548.82 million during the period April 2000 to February 2015. GOVERNMENT INITIATIVES The Government of India has identified the power sector as a key sector of focus to promote sustained industrial growth. The RE-INVEST 2015 which concluded on February 17, 2015, is a significant step in making India self-reliant in energy. The three day RE-INVEST 2015 received 2,800 delegates participating from 42 countries and saw green energy commitments worth 266,000 MW. Some of the initiatives taken by the Government of India to boost the power sector of India are as follows: • A Joint Indo-US PACE Setter Fund has been established with a contribution of US$ 4 million from each side to enhance clean energy cooperation. • The Government of India has announced a massive renewable power production target of 175,000 MW by 2022, comprising 100,000 MW from solar power, 60,000 MW from wind energy, 10,000 MW from biomass and 5,000 MW from small hydro power projects. • The Union Cabinet of India has approved 15,000 MW of grid-connected solar power projects of National Thermal Power Corp Ltd (NTPC). • The Indian Railways has signed a bilateral power procurement agreement with the Damodar Valley Corporation (DVC). The agreement was signed between North Central Railway and DVC. This is the first time the railways will directly buy power from a supplier. • US federal agencies have committed a total of US$ 4 billion for projects and equipment sourcing, one of the biggest deals for the growing renewable energy sector in India. • A memorandum of collaboration (MoC) was signed in New Delhi on January 20, 2015 between the Indian Institutes of Technology (IITs) and Oil & Natural Gas Corporation (ONGC) to work towards a collective research and development (R&D) programme for developing indigenous technologies to enhance exploration and exploitation of hydrocarbons and alternate sources of energy. ROAD AHEAD The Indian power sector has an investment potential of Rs. 15 trillion (US$ 237.35 billion) in the next 4-5 years, providing immense opportunities in power generation, distribution, transmission and equipment. The immediate goal of the government is to produce two trillion units (kilowatt hours) of energy by 2019. This will mean Production and sales Production During the year under review, production volumes across various divisions were as follows: Iron Ore Mining: doubling the current production capacity in order to achieve provide 24x7 electricity for residential, industrial, commercial and agriculture use. The Government had rewritten the National Solar Mission with target of 100,000 MW capacity by 2022. The government has also sought to restart stalled hydro power projects and increased the wind energy target from 20 GW to 60 GW by 2022. References: Ministry of Power, Press Information Bureau, Media Reports Source: (India Brand Equity Foundation) ANALYSIS AND DISCUSSIONS ON FINANCIAL PERFORMANCE Review of operating & financial performance - standalone The performance of your Company during the year under review remained satisfactory under the brvailing circumstances and overall slowdown in demand growth coupled. The operating & financial performance of the Company during the year under review is discussed below: The iron ore mining operations of the Company increased during the year under review by 37% due to aggressive mining at Ari Dongri Iron Ore Mines and commencement of commercial operations in Boria Tibu mines during the year. The mining operations in Boria Tibu mines is progressing gradually. The expansion of Ari Dongri mines from capacity of 0.7 million tons to 1.4 million tons is expected to be commissioned during the current financial year and the company expects substantial increase in iron ore mining during the current financial year. The Company aim to be self-sufficient in meeting iron ore requirement from captive mines over a period of 2-3 years. Iron Ore Pelletisation: The production of Iron ore pellets increased during the year by 70% due to full capacity utilization of 0.6 MTPA pellet plant and increasing the capacity utilization in 1.2 MTPA pellet plant commissioned during the brvious year. During last year financial year 0.6 MTPA Pellet plant was under shutdown for about three months for maintenance. Sponge Iron The sponge iron production maintained at the same level with a marginal increase of 2% on yoy basis, however the Sponge Iron plant has achieved new milestone by achieving ever highest annual production and ever highest monthly production for the month February 2015 (38711 Ton). The sponge iron production is further expected to improve during the current financial year. Finished Steel & Rolled Products The operations in the steel melting, rolling and wire drawing divisions decreased due to adverse market conditions and poor realizations. The company took strategic decisions from time to time to cut-down the production looking at the profitability and market demand. The Company is taking up modernization cum balancing and expansion project at an investment outlay of Rs. 150 crores approx. The Project is expected to be completed during H2FY17. Post the completion of capex plan the capacity of steel melting and rolling mill shall enhance to 400000 tons per annum. Ferro Alloys: The Company is making silico manganese, used in steel making. The production of ferro alloys increased marginally by 3% yoy. Captive Power: The Company is operating 73MW of captive power generation capacity out of which 42MW is waste heat recovery, 11 MW thermal coal based and 20 MW bio mass power. The overall production volumes maintained at the same level as compared to brvious year. However during the year under review the operations in coal based thermal power plant was shut down due to high cost of coal and uneconomical operations. The thermal coal cost has since come down in international markets and company aims to maximize the power generation during the current year, which will help improving the production of steel billets, which is fully dependent on captive power. In fiscal 2014, the Company recorded net revenue of Rs. 1935.05 crores against Rs. 1,540.92 crores for FY 2014, registering growth of 25.57% on year on year basis. The increase in net revenues was primarily on account of the increase in the volume of iron ore pellets by 132% though there was a reduction in realization by Rs. 1037 per ton. The Sponge Iron however, registered increase both in terms of sales volumes and realization (14%, Rs. 658 per ton). Similarly the average selling prices of all other products also were recorded higher as compared to brvious year resulting in overall growth in revenue. The selling prices during the year under review fell by about 25% from the pick cycle prices brvailing in Q1FY15 till end of the year. This has impacted overall sales realization, though the average realisations during the year remained higher as compared to brvious year, which overall impact on the operating profitability of the Company. The trend in falling sales realization continues during the current year due to increase in cheap imports from China, Russia etc. This will have negative impact on margins unless the fall prices get arrested by policy action by the Government. Iron ore and fines Overall quantity consumption of Iron ore fines is substantially increased due to higher production of Iron Ore pellets. Further, merely 18% of quantity consumption was fulfilled from captive mines (Low cost) and rest requirement was fulfilled from market purchases (higher rates). The during the year under review the prices of iron ore increased on account of ban in iron ore mining in Orissa by order Hon'ble Subrme Court in May, 2014 on account of illegal mining. This resulted into increase in domestic iron ore prices, despite fall in prices in global markets during the year. Consequent upon amendments MMRDA Act the iron ore supply & prices has since improved and expected to remain lower. Coal There are different types and grades of coal used in the Company i.e. imported coal, steam coal, ROM coal and washed coal. During FY 15, the Company was forced to use costly Imported and Washed Coal instead of cheap ROM Coal due to lower supply of linkage coal by Coal India Ltd on account of diversion of coal to power sector. Total Share of ROM Coal during the year was around 30% of total coal against 65% of last year. However, the consumption of coal per ton of sponge iron is reduced to 1.213 as against 1.53 tons in the brvious year on account of use of better quality imported coal. However the overall coal cost per ton of sponge iron production remained higher on account of high prices of imported coal. The global coal prices are falling due to excess supply and impact of the same will be felt in current year. The domestic auction coal prices have also started falling on account of increased supply and price fall in international markets. Pig iron/Scrap During the year, the production of steel billets decreased by 5% as a result of which the consumption of pig iron and scrap also decreased. Manganese ore: The Manganese Ore consumption has been decreased due to better quality of ore though there was a marginal increase in production of Ferro Alloys. Rice husk In FY 15, consumption of Rice husk is marginally decreased due to strategic management of raw-material and plant operations. iii) Operating and other expenses The Company's operating and other expenses increased to Rs. 341.85crore as against Rs. 298.43 crore due to an increase in the cost of stores and consumables, fuel and other expenses. The increase in operating cost is on account of higher production volumes across divisions (mainly Pellet and Gasifier). However the operating expenses as percentage of net sales decreased by 1.70%. iv) Employee cost The employee cost during the year increased by 20.94% to Rs. 67.42 crore compared to Rs. 55.75 crore in the brvious year due to the annual increment in salaries and the recruitment of additional employees to meet increased requirements in the pellet plant and Gassifier. The overall employee cost decreased to 3.48 % of the net sales compared to 3.62% during the brvious year due to increase in the sales turnover. v) Operating margins (EBIDTA) The earning before interest, debrciation and taxes decreased to 14.46% compared to 15.34 % of net sales during the brvious year due to reduction in realisation of various products (mainly Pellets) and increase in cost of major raw materials (Iron ore fines and Imported Coal) and overall impact of fall in value of inventory consequent upon fall in steel prices. vi) Interest and financial charges Total expenses towards interest and bank charges increased from Rs. 114.51 crore in 2013-14 to Rs. 144.88 crore in 2014-15. The higher interest cost in FY15 was on account of full impact of interest on loans raised for pellet plant, which was commissioned in H2FY14 and higher utilisation of working capital limit during FY15. vii) Debrciation The debrciation during the year has been provided as per Revised Schedule - II under the Companies Act, 2013. Debrciation on fixed assets is almost same with a slight increase due to change in method of computation of Debrciation from straight line method to Useful life method (Revised Schedule - II) and impact of full debrcation charge on cost of 1.2 million pellet plant. The debrciation would have been higher as per the old schedule. viii) Profit before Tax (PBT) The Company has achieved a net profit before tax (PBT) and extraordinary items of Rs. 69.12 crore, as against Rs. xiii) Fixed assets 55.21 crore, resulting in increase of 25% YoY. The PBT margin was 3.57% of net sales as against 3.58% during the brvious year. ix) Provision for taxation The provision for taxation has been made as per provisions of Income Tax Act. x) Profit After Tax (PAT) The Company achieved net profit after tax of Rs. 62.11 crores as against Rs. 55.94 crores during brvious year. xi) Appropriation The Company has during the year transferred Rs. 15.00 crores (brvious year Rs. 17.91 crores) from Debenture Redemption Reserve to General Reserve, consequent upon redemption of Debentures (A series & B series) the tune of Rs. 60.00 crores during the year under review. The Company did not transfer any amount to the general reserve (Previous Year Rs. 6 crores) out of surplus Profit and Loss Account. xii) Provision for dividend and dividend tax The Board of Directors of your Company recommended a final dividend @ 10% i.e. Re.1.00 per equity share for the year ended March 31, 2015, subject to approval of the shareholders. Further, provision for dividend distribution tax of Rs. 54.42 Lacs was made. The total outgo of funds on account of dividend payment for the year is Rs. 3.82 crore. xiv) Inventories. The overall value of inventory of raw materials decreased to Rs. 139.49 crore as on March 31, 2015 as compared to Rs. 165.30 crore as on March 31, 2014. The average level of holding of raw material stood at 43 days of consumption as compared to a level of 62 days during the brvious year. Raw Material inventory decreased due to increase in production of Iron ore pellet consequently resulting in higher consumption of iron ore fines and fall in value of inventory on account of fall in inventory prices. xv) Sundry debtors The average number debtors outstanding for FY 15 were 22 days of sales outstanding as compared to 17 days in FY 14. The overall level of receivable has increased due to adverse market conditions. However the overall receivable level is expected to remain under 30 days going forward. CONSOLIDATED FINANCIAL STATEMENTS Financial performance The consolidated financial results of the Company included results from the operations of subsidiary companies i.e. Ardent Steel Ltd, Hira Ferro Alloys Ltd, Godawari Green Energy Limited and other subsidiaries. The Company achieved net sales of Rs. 2,394.98 crore during the year under review as compared to Rs. 2,118.05 crore during the brvious year and EBITDA of Rs. 418.43 crore as compared to Rs. 362.79 crore during brvious year. The EBITDA Margins improved marginally to 17.47% as compared to 17.13% during brvious year backed by improvement in operations of the subsidiary company M/s Godawari Green Energy Limited. The consolidated net profit of the Company after minority interest increased to Rs. 66.21 crore as compared to Rs. 57.84 crore in the brvious year. The operations of major subsidiary Companies are discussed below: Godawari Green Energy Ltd (GGEL): GGEL has set up 50MW Solar Thermal Power plant in Rajasthan, which was commissioned in June, 2013 and started commercial operations from Oct, 2013. The year under review was the first full year of operations of the Company. During the year the Company has achieved PLF of 22.55% and recorded power generation of 98.78 million units as compared to 52.07 million units in FY14. The Company has achieved net sales of Rs. 105.20 Crores during the year as compared to net sales of Rs. 39.56 crores recorded in brvious year. The Company achieved net profit after tax of Rs. 3.05 crores as against net loss of Rs. 14.96 crores in brvious year. The Company has entered into long term PPA for 25 years with NTPC Vidyut Vypar Ltd (NVVN) under JNNSM for sale of entire power at a fixed price of Rs. 12.20 per unit. The operation of power plant is fully settled and operations are running satisfactorily as per available DNI. However the actual DNI at plant location is lower as compared to originally estimated DNI at the time of bidding for the project resulting into lower PLF. This has impacted overall revenue of the Company. In view of lower generation the Company has filed a petition before CERC for revision in tariff and the petition has been accepted by CERC. However the final hearing and disposal of petition is pending. Hira Ferro Alloys Ltd (HFAL): The Company is operating ferro alloys manufacturing plant with capacity of 52200 MT and captive thermal power generation of 20MW. The Company also operates 8 MW bio mass power plant. The operations of HFAL remained subdued due to overall deceleration in demand for ferro alloys in the domestic and the international markets. The Company achieved net sales of Rs. 174.62 crores during the year as compared to net sales of Rs. 212.76 crores in brvious year. However the Company's operations resulted into net loss of Rs. 29.15 crores (Before extraordinary items) on account of debrssed market condition and fall in value of inventory as compared to net profit of Rs. 2.71 crores during brvious year. The Company has during year sold its stake in Maruti Clean Coal & Power Ltd, which resulted into extra-ordinary gain of Rs. 40.81 crores and overall net profit after tax of Rs. 11.67 crores. Ardent Steel Ltd The Company has set up 0.6 million ton pellet plant in Orissa. The Company has achieved net sales of Rs. 192.85 crores during the year as compared to Rs. 367.69 crores in brvious year. The Company recorded a net loss of Rs. 6.44 crores as compared to net profit of Rs. 38.50 crores in brvious year. The operations of the Company impacted during H1FY15 on account of shut down of plant consequent upon plant closure notice issued by Ministry of Environment & Forest (MoEF) for want of environment approval. The matter was resolved in Sept, 2014. In view of the same the operating volumes of the Company declined to 282763 MTs in FY15 as compared to volumes of 546630 MTs in FY14. Further operations of the Company also impacted on account of fall in selling prices of pellets and higher input cost due of shortage of iron ore during year under review. Risk management Risk is an integral factor in virtually all businesses. At GPIL, risks are adequately measured, estimated and controlled. Irrespective of the type of risk or the activity that creates it, the Company's fundamental approach to risk management remains the same: identify and measure risks, leverage an in-depth knowledge of the business and competitors and respond flexibly in the understanding and management of risks. Economy risk Domestic challenges like inflation, liquidity crunch, slower industrial growth, debrciating rupee, political instability and increasing commodity prices might affect performance. Risk mitigation: * GPIL correctly anticipated that the challenge of the future would revolve around the timely availability and affordability of resources and raw materials, which translated into timely backward integration initiatives. As a part of this backward integration, the Company manufactures products that are consumed within and also sold to customers; the ability to provide a large and growing customer base from within has helped reduce marketing and costs of inventory, enhancing overall viability. Besides, the savings from captive supply has helped make the product more competitive for external sale, creating a unique win-win proposition. The Company generates significant per cent of its overall resource, raw material or power requirements by value from within, strengthening its overall competitiveness. As a result, integration is not incidental to the Company's existence; it rebrsents its very core. Industry/Demand risk The Company may be affected by impact on demand due to the competitive action within the steel sector, import from Asian countries and industry down turn. Risk mitigation: The Company has significantly reduced the risks arising from erratic demand through integration of operations and captive production of iron ore and pellets. Besides, the Company's plants are located in a large steel manufacturing belt, making it possible to provide products with speed, periodic delivery and relatively high logistic efficiency, lower working capital cycle within the region. It is estimated that the 90% of the Company's output of pellets, sponge iron and its billets are sold within 200 kms of its plant. The Company's power sales are secured through merchant power sales agreement; the Company is engaged in long-term power sales agreement (25 years) with the government for units generated from its solar thermal power plant. Technology risk Technology obsolescence could warrant an increase in investments, affect cash flow and impact profitability. Risk mitigation: The Company invested in the latest technologies, which enables it to manufacture quality products After completion of a project, the Company adapts the technology and builds in-house capabilities for further expansion. It also has a facility for the critical components for the existing units to lower plant downtime and control its operations better. It has also introduced the latest technology in the solar thermal power plant, which will lower the operating expenditure for the Company. Input risk In the business of steel manufacture, a number of diverse inputs are required to be progressively taken into the next stage. The challenge lies in an ability to procure these intermediate raw materials at the right cost and in the right time. Risk mitigation: The Company's integrated business model which makes it possible for the end product of one business to be positioned as the raw material of another, creating a self-feeding ecosystem within minimal inventory, costing and logistic issues. The Company has also secured captive iron ore mines, in order to protect the input cost fo its main raw material i.e. iron ore. The extent of this integration has strengthened the Company's insulation from external pricing and supply shocks, enhancing input security. Besides, the Company is selectively enhancing production capacities, strengthening input security further. Project management risk Delay in project completion could lead to cost overrun. Risk mitigation: Over the years, the Company recognised that the principal viability risk was not derived as much from the marketplace as it was from within. Among the factors from within the organisation that affected viability, one of the most critical was the ability of the Company to commission its proposed plants on schedule. It is the Company's experience that timely commissioning creates a foundation of moderate capital cost and triggers revenue inflow to start contributing towards project payback. Over the years, the Company invested in project management with the objective to strengthen overall competitiveness: as a result, the focus graduated from timely commissioning to br-scheduled commissioning, translating into a probable cost-underrun, accelerated revenue inflow and quicker payback. This is the Company's project management track record: The Company has successfully commissioned its 1.20 MTPA iron ore Pelletisation plant 7 months ahead of scheduled date of commencement of commercial operations. The Company's 50 MW solar thermal power plant also achieved distinction of being the first company in India within record time much ahead of 6 other similar projects awarded by the government Location risk Locational disadvantage could affect logistic and time schedules, affecting viability. Risk management: *The Company's manufacturing facility is located at the heart of industrial Chattisgarh at Raipur. The Company's mines are located 150 km from the plant and adjacent to a highway, making logistics management convenient. The Company's location makes it easy to access JNPT port in the West (1,200 kms), Vishakhapatnam port in the South 500 kms and Haldia and Paradeep ports in the East (800 and 600 kms respectively) for the export for ferro alloys and coal import. The Company markets 50 per cent of its pellet output within 200 km from its manufacturing units. The Company's pellet plant in Orissa is also located at rich belt of Iron Ore in Kenjhor Dist, near to is principal raw material i.e. iron ore fines. The railways siding is located at about 3 KM away from plant for transport of pellet, making it an attractive location for such project. Similarly the Company's 50 MW Solar Thermal Power Plant is located in Jaisalmer dist in Rajasthan having highest DNI (Solar Resource) in India, which an ideal location for a solar power plant. Caring for society GPIL believes that it is imperative to extend beyond the normal course of business and contribute to society. CSR commitment The Company's CSR commitment is encapsulated in the following priorities: *Enhance health-related and educational awareness *Conduct affairs of our Company in socially beneficial manner *Understand, support and develop communities and cultures in the vicinity of our plants *Protect the environment and ensure safety of the people connected with the Company *Enhance the value of the Company through sustainable and inclusive growth Education initiatives 1. The Company runs a school (Akansha) for specially-abled students. 2. Conducted E-Sanskar Computer Training for tribal students. 3. Provided salary to night guard & teachers of Government Primary and Middle School of village Mandhar & Mandhar and Jharantola. 4. The Company organised education trip for the students of Govt. School Kachhe & Parrekodo. 5. Salary given to teachers of Govt. School Boria Tibbu, Kachhe & Parrekodo. Health initiatives 1. During the year under review, the Company organized a health camp to detect Jaundice at Moudhapara, Raipur. 2. Operating First Aid Health Centre in the mining area. 3. Creating awareness of health, safety and environment. Drinking water projects 1. Undertook safe drinking water projects for villages near its plants and mines. 2. Established submersible water pumps in government primary and middle schools in villages. 3. Constructed concrete stand for water tank at village Boria; 4. Water tankers were engaged in Piyau Hut and villages during summer season 5. Deepening and cleaning of Ponds in villages. 6. Repairing of Borewell at village Bhursapara. Infrastructure development 1. Development of Garden & Fountain in various places in Raipur. 2. Construction and Maintenance of School Building; 3. Constructed Stage for Cultural Programmes; 4. Construction and cleaning of drains and Roads in village Kachhe and Tada; 5. Construction of Road and Ponds near Villages (Tada & Siltara); 6. Construction of culvert on Parekodo roadand Dorba; 7. Murum filing, Leveling & Excavation work at village Kachhe, Tekadhora, Saleh Chowk; 8. Various infrastructure development i.e. Repairing & leveling of Road and Maintenance of School ground in peripheral villages of Kachhe, Environment 1. Expenditure incurred for maintenance of plantation. 2. Planted 29,646 saplings in its project area, 37,200 saplings on roadsides (covering 44 km) during 2014-15. Sports & other community development activities: 1. Promoted sports activities; 2. Distributed Blankets for Sankul level Sports Competition, Salhe Chowk, bhanupratappur; 3. Extended financial assistance for master Piyush for admission in Aakanksha School 4. Provided sponsorship for education of 05 students Blind Organisation of India. Sanitation 1. Clean India Campaign in schools & village in Kachhe & Parekodo Women Empowerment 1. Establishment and operational Cost of Stitching and Tailoring centre. For and on behalf of Board of Directors Chairman Place: Raipur Date: 1 1.08.2015 |